Valassis executives hold stock in
company

Harland Clarke Holdings Corp. agreed to pay
$1.84 billion, or $34.04 per share, to acquire Valassis
Communications Inc. Here's a look at the shares held by the
top executives at the company*: • Al Schultz, former CEO and
non-executive chairman — 292,415 shares; $10 million • Robert
Recchia, executive vice president and CFO — 130,306 shares;
$4.4 million • Robert Mason, CEO — 123,453 shares; $4.2
million • Todd Wisely, general counsel and executive vice
president of administration — 69,321 shares; $2.4 million •
Ronald Goolsby, COO — 65,871 shares; $2.2 million • Suzanne
Brown, executive vice president of sales and marketing —
54,798 shares; $1.9 million • Brian Husselbee, president and
CEO of NCH Marketing Services Inc., a Valassis subsidiary —
51,391 shares; $1.7 million • James Parkinson, chief digital
and technology officer — 38,335 shares; $1.3 million * Shares
based upon most recent data available. It's unclear whether
top executives will sell shares or receive stakes in the new
private company.

Competition in the direct-mail and coupon business may have forced the pending sale of Valassis Communications Inc. to San Antonio’s Harland Clarke Holdings Corp., according to an analyst.

Harland announced today that it would buy the Livonia company for $1.84 billion, or $34.04 a share.

Ed Atorino, managing director and media analyst for The Benchmark Co. LLC, based in New York, said the sale was a smart move for Valassis as marketers continue the shift from mail inserts and envelopes to television and other marketing strategies.

“Valassis only hit their sales targets in shared-mail once last year; they are also battling with coupons against News America,” Atorino said. “So these guys (Harland) came along and convinced Valassis they’d be better off going with them than alone.”

Valassis didn’t immediately respond to questions about the sale.

The company has seen recent earnings struggles: In October it reported in its third-quarter federal Securities and Exchange Commission filing that its Neighborhood Targeted segment saw a nearly 69 percent year-over-year revenue decline.

The segment, which is newspaper advertising inserts aimed at specific ZIP codes, saw third-quarter revenue of $23.7 million. Last year, it was $75.8 million.

In 2013, for the third quarter ending Sept. 30, Valassis reported $27.7 million in net income on revenue of $489.4 million. In the same quarter last year, net income was $36.7 million on revenue of $523.8 million. That represents a 24.6 percent quarterly earnings decline, and a year-over-year 6.6 percent fall in revenue.

Others in the industry have shared in Valassis’ pain. Revenues for San Antonio-based direct-mail marketer Harte-Hanks Inc. dropped significantly after its largest client, J.C. Penney Co. Inc., changed its marketing strategy from direct mail to broadcast in 2012.

“The mail business is struggling,” Atorino said. “It’s inefficient, but cheap; but companies want performance, and envelopes in the mailbox don’t work anymore.”

Wall Street reaction was negative and swift, even more so after Valassis discovered issues with Advo’s financials and sued to halt the acquisition. The companies eventually agreed to trim $125 million off the sale price, and the deal was finalized in March 2007.

Then-CEO Al Schultz was able to turn the Advo deal into a positive.

Valassis reported revenue up 144 percent to $607 million during the third quarter of 2007. Net income was up 148 percent, from $6.6 million in the quarter a year earlier to $16.4 million.

Almost all of that is attributable to Advo business. The coupons, distributed as free-standing inserts, are now less than 10 percent of Valassis’ business. They used to account for 95 percent of its profits.

But Atorino said the good business from Advo proved difficult to maintain.

“They decided to take a shot with Advo, but it was never a good company,” he said. “Al (Schultz) cleaned it up, but the company later found out it was just too tough a business.”

Competition remained tough in other segments, as well, including the coupon business. As Valassis’ stock and profits continued to slide in the mid-2000s due to a price war with its primary competitor, News America Marketing, a New York City-based subsidiary of Rupert Murdoch’s News Corp., the company took action.

The price war led to Valassis filing a suit against News America, in January 2007 in the U.S. District Court for the Eastern District of Michigan in Detroit, alleging antitrust regulation violations related to the pricing of freestanding inserts.

News America agreed to pay $500 million to Valassis in 2010 to end the four-year court battle.

However, the suit didn’t end News America’s practices, Atorino said.

“They are still going head to head with News America,” he said. “Valassis can’t raise rates, so they are stuck because News Corp. is keeping prices down.”

But Atorino said while Valassis has missed out on web-based opportunities, the deal with Harland can buoy new investment.